Aksh Optifibre Ltd. RESEARCH. Investment Highlights:

Transcription

1 RESEARCH Aksh Optifibre Ltd. BUY Key Indicators as on 3/3/215 SOURCE:CMIE Closing Price (Rs.) EPS (Rs.) - TTM 2.32 P/E - TTM 7.14 BV per Share (Rs. In crore) PB.65 Yield % 1.52 Mkt Cap (Rs. in Crore) 25.8 Borrowing as on Sept Beta 1.3 Mkt Cap/Sales - TTM.83 Mkt Cap/PBIDTA - TTM 4.2 Mkt Cap/PBDT - TTM 5.2 Mkt Cap/PAT - TTM 7.14 Mkt Cap/Cash Profit - TTM 5.3 PBDITA Rs. in Crores TTM Face Value 5 Shares Outstanding crores Equity Share capital in Rs. in Crores Share holding (%) Dec-214 Promoters Public FIIs 2.3 Others Investment Highlights: Demand triggers for OFC :- NOFN project Mandatory FTTH infrastructure Implementation of 4G services and 1 smart cities World leader in FRP manufacturing with 16-18% market share along with Backward integration helps to control raw material cost Recent orders of Rs. 32 crores gives revenue visibility Other Positives :- Falling Accumulated losses Dividend paid after 7 years with yield of 1.52% Comfortable Interest coverage ratio of 6.35 times Low floating stock of 33.16% Issue of % FCCB to save 3 crores of Interest annually Trading below its historic PB & EV multiple o f 1.18 & 7.6 respectively Areas of Concerns Unstable Sales as well as margins leading to negative cash flows Pg. 1

2 Demand for OFC triggers Investment Rationale: Demand is likely to increase for Optical Fibre Cables due to :- Government s NOFN (National Optical Fibre Network) project to bring connectivity to 2,5, gram panchayats. The company has already received an order of Rs. 2 crores for the same. Government s plan of mandatory FTTH (Fibre to the Home) infrastructure in every high rise building along with converting India into Digital India will boost demand for OFC. Implementation of 4G services by telecom operators and development of 1 smart cities will raise the demand for OFC. Present fixed assets turnover ratio is 1% compare to Birla Ericsson of 279% With increase in demand for OFC(Optical Fibre Cable), the Fixed Asset turnover ratio may increase thus improving efficiencies Aksh Optifibre ltd Mar 99 Mar 1 Mar 3 Mar 5 Mar 7 Mar 9 Mar 11 Gross fixed assets 4% 35% 3% 25% 2% 15% 1% 5% % GFA Turnover Birla Ericsson ltd Mar 99 Mar 1 Mar 3 Mar 5 Mar 7 Mar 9 Mar 11 Gross fixed assets GFA Turnover % 3% 25% 2% 15% 1% 5% % World leader in FRP manufacturing with 16-18% market share alongwith Backward integration helps to control raw material cost The two key raw materials, optical fibre and FRP (Fibre Reinforced Plastic) rod, constituting 7% of cost of optical fibre cables are manufactured in-house. This makes Aksh as one of the most cost effective optical fibre cable manufacturer. From the below chart we can see that RM/Operating exp % of Aksh optifibre is lower than Birla Ericsson. Pg. 2

3 1% 8% 6% 4% 2% % Raw Materials/Operating Exp% Mar 99 Mar Mar 1 Mar 2 Mar 3 Mar 4 Mar 5 Mar 6 Mar 7 Mar 8 Mar 9 Mar 1 Mar 11 Mar 12 Mar 14 Aksh Optifibre Birla Ericsson Recent orders of Rs. 32 crores gives revenue visibility Toplines which were inconsistent would go up by considering the below mention order book Rs. in cr March-1 March-11 March-12 March-13 March-14 Sales PBIDTA Received Rs. 12 cr defence contract (Nov,214) The Company has been awarded a Rs. 2 Crores plus order for Package B of ambitious National Optic Fibre Network (NOFN) backbone project. The project is aimed at providing connectivity to over 25, gram panchayats across the country for better e-governance, e-health services and educational services. (Jan, 214) Exports which were negligible till FY21, increasing at a better rate and to further strengthen its market position, it has set up its FRP manufacturing facility outside India in AOL, FZE Dubai with installed capacity of 4km of Fibre Reinforced Rods (FRP) (June,214) Pg. 3

4 Export/Sales (%) Mar 99 Mar Mar 1 Mar 2 Mar 3 Mar 4 Mar 5 Mar 6 Mar 7 Mar 8 Mar 9 Mar 1 Mar 11 Mar 12 Mar 14 Subsidiaries Apaksh Broadb and AOL (FZE) Extent of Holding 99.92% 1% 1% Incorporation India UAE UAE Turnover (cr) PAT (cr) AOL Project JLT (step down) Apaksh Broadband: The Company is setting up a Broadband Project in the State of Andhra Pradesh. AOL (FZE): Initially engaged in trading of telecom equipments and other products. It started FRP production facility in June 214. AOL Project JLT: Engaged in consultancy services in the field of telecommunication and project management, which includes the services like concept framing, designing, specification and sizing. Falling Accumulated losses since Accumulated losses (Rs. Cr) 9 Mar 1 Mar 11 Mar 12 Mar 13 Mar 14 Mar Pg. 4

5 Company has paid dividend of 5% after 7 years 4.% 3.% 2.% 1.%.% 1.% 2.% 3.% 4.% Dividend Payout% Mar Mar 1 Mar 2 Mar 6 Mar 7 Mar 14 Comfortable Interest coverage ratio of 6.35 times From the given below chart we can see that debt has come down from Rs cr to Rs.89 cr (FY8-13). However, it has gone up to Rs.131 in FY 14 cr due to purchase of fixed assets & short term loans Mar 99 Mar Mar 1 Mar 2 Mar 3 Mar 4 Mar 5 Mar 6 Mar 7 Mar 8 Mar 9 Mar 1 Mar 11 Mar 12 Mar 14 Borrowings Interest cover (times) Pg. 5

6 Low floating stock of 33.16% Promoters % Mar 1 Dec 1 Sep 2 Jun 3 Mar 4 Dec 4 Sep 5 Jun 6 Mar 7 Dec 7 Sep 8 Jun 9 Mar 1 Dec 1 Sep 11 Jun 12 Dec 13 Sep 14 Promoters % share in total equity shares Bharati Shailesh 1.82 Dr Kailash S Choudhari Popatlal F Sundesha 3.48 Seema Choudhari 4.82 Shailesh Popatlal Sundesha 3.6 Sharda Popatlal 3.13 Sub Total (a) Non Promoters Ashari Agencies Ltd 1.32 Aspire Emerging Fund 1.98 Bank Of New York Mellon Dr 5.3 Globe Fincap Limited 2.5 Jds Finance Company Ltd 1.24 Master Trust Ltd 4.24 Religare Finvest Ltd Sunidhi Capital Market Ltd 5.94 Sunima Steel Marketing Pvt Ltd 1.5 Sub Total (b) 37.6 Total(a+b) Issue of % FCCB in Feb 14 to save 3 crores of Interest annually Low Cost Debt: Company has issued % FCCB s of USD million (Rs.23 Cr) due on February 219 which are convertible into stocks at premium of 2% leading to savings of appx Rs.3 crores annually Pg. 6

7 Trading below its historic PB & EV/EBITDA of 1.18 & 7.6 respectively PB Sep Dec 1 Mar 3 Jun 4 Sep 5 Dec 6 Mar 8 Jun 9 Sep 1 Dec 11 Jun EV/EBITDA Sep Dec 1 Mar 3 Jun 4 Sep 5 Dec 6 Mar 8 Jun 9 Sep 1 Dec 11 Jun 14 Area of concern: Unstable sales as well as margins leading to negative cash flows 4.% 2.%.% 2.% 4.% 6.% Sales PBDITA net of P&E&OI PAT net of P&E&OI PBDITA PAT Particulars (Rs. in Cr) Mar-1 Mar-11 Mar-12 Mar-13 Mar-14 Sales PBDITA PBDITA net of PE & OI PAT PAT net of PE & OI Pg. 7

8 Unstable flow cash Year CFO Purchase of FA Interest paid Dividend paid Net Cash Mar Mar Sept Mar Mar Mar Mar Mar Source: Prowess Company Profile: Aksh Optifibre Ltd. was incorporated on 19 March 1986 as Aksh India Pvt. Ltd. The company changed its status to a public limited company on 13 March The name of the company was changed to Aksh Optifibre Ltd. on 17 April 2. The company's equity shares were listed on the Bombay Stock Exchange (BSE) and on the National Stock Exchange (NSE) on 23 August 2. The company's registered office is located at RIICO Industrial Area, Phase-III, Bhiwadi, Rajasthan.The company is promoted by Dr. Kailash S Choudhari. He is the Managing Director of the company. Aksh Optifibre manufactures optic fibres, optic fibre cables and glass fiber reinforced plastic (FRP) rods. Under optical fibre category, the company manufactures single mode and multi mode fibre cables. Optical fibre cables have applications in high-speed voice, data and video communications. FRP rods combine high performance properties of glass reinforcements with unique resin formulation to produce a strong and cost effective cable strength member. Properties like consistent diameter and long, splice free lengths enables enhancement of productivity in cabling operations. Business Segment Business Segment (Rs. In cr) Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 Mar-14 Net sales Cable Manufacturing Services Trading PBIT / Sales (%) -15.7% -22.1% -16.3% 7.4% 1% 12.% Cable Manufacturing -2.7% 2.7% 4.1% 11.9% 16.9% 18.7% Services % -649% % -32.8% -87.9% % Trading 5.1% 5.6% 8.8% 11.3% 9.7% Pg. 8

9 Indian Fibre Optic Cable Industry India is one of the huge markets, which cannot be overlooked by any of the global fiber optic product suppliers. Developments in high speed broadband markets have pushed the Indian telecom sector to the next phase of growth and have started bringing more opportunities for optical fiber cable manufacturers in the country. Investments in optical fiber cable networks are being driven by the growing demand for broadband services in India. Though the growth percentage is not significant, volume-wise India is a promising market. Next generation broadband technologies such as Long Term Evolution (LTE) and Fibre To The X (FTTx) will drive the demand for more optical fiber cables. The National Optical Fiber Network (NOFN) project is funded from the Universal Service Obligation Fund and has set the stage for extending broadband access to the country s 25, gram panchayats (smallest administrative units in India) by 216. More than 5, kilometers of optical fiber cables are estimated to be deployed in NOFN project. This US$3.5 billion ambitious project in India would be a major milestone in India s telecommunication history and is the largest single effort and investment enforced by the government of India. Optical fiber cable market is growing in India and is estimated to grow over the next many more years as the potential for growth is simply huge in India. Source: Quarterly Results (Standalone) Aksh Optifibre Ltd. Source: CMIE Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Currency: Rs. Crore (Non-Annualised) 3 mths 3 mths 3 mths 3 mths 3 mths 3 mths Total income Net sales Other & extra-ordinary income Change in stock Total expenses Operating expenses Raw materials, etc & purch of fin gds Salaries and wages Total other expenses Extra-ordinary expenses.7.12 PBDIT Interest expenses Depreciation PBT PBDT Corporate tax/direct taxes PAT Pg. 9

10 From NAYAN M. VALA SECURITIES PVT.LTD.RESEARCH Analyst Certification We /I, Maulik Shah, MBA, Ashwini Sonawane, MMS, Research Analysts, authors and the names subscribed to this report; hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Disclaimers and Disclosures-: Nayan M Vala Securities Pvt. Ltd. (CIN- U6712MH25PTC152929) is a Broking Firm and a 1st batch member of The National Stock Exchange of India Ltd. (NSE) since Nayan M Vala Securities Pvt. Ltd. is a corporate trading member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE), MCX Stock Exchange Limited (MCX-SX). Nayan M Vala Securities Pvt. Ltd. is engaged in the business of stock broking (Institutional and retail) and depository participant. Nayan M Vala Securities Pvt. Ltd. is under the process of seeking registration under SEBI (Research Analysts) Regulations, 214. NAYAN M VALA SECURITIES PVT. LTD. hereby declares that it has not defaulted with any stock exchange nor its activities were suspended by any stock exchange with whom it is registered in last five years. NAYAN M VALA SECURITIES PVT. LTD. has not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has its certificate of registration been cancelled by SEBI at any point of time. NAYAN M VALA SECURITIES PVT. LTD. offers research services to clients as well as prospects. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. Other disclosures by Nayan M Vala Securities Pvt. Ltd. (Research Entity) and its Research Analyst under SEBI (Research Analyst) Regulations, 214 with reference to the subject company(s) covered in this report-: This document has been prepared by the Research Division of NAYAN M VALA SECURITIES PVT. LTD. and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of NAYAN M VALA SECURITIES PVT. LTD. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, NAYAN M VALA SECURITIES PVT. LTD. has not independently verified the accuracy or completeness of the same. Neither NAYAN M VALA SECURITIES PVT. LTD. nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. NAYAN M VALA SECURITIES PVT. LTD. or its associates may have financial interest in the subject company. Research Analyst or his/her relative s financial interest in the subject company - NO NAYAN M VALA SECURITIES PVT. LTD. or its associates and Research Analyst or his/her relative s does not have any material conflict of interest in the subject company. The Research Analyst or (NAYAN M VALA SECURITIES PVT. LTD.) have not been engaged in market making activity for the subject company. NAYAN M VALA SECURITIES PVT. LTD. or its associates does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report. Research Analyst or his/her relatives have actual/beneficial ownership of 1% or more securities of the subject company at the Pg. 1

11 end of the month immediately preceding the date of publication of Research Report - NO NAYAN M VALA SECURITIES PVT. LTD. or its associates have received any compensation for brokerage services from the subject company in the past 12 months - NO NAYAN M VALA SECURITIES PVT. LTD. or its associates have received any compensation or other benefits from the Subject Company or third party in connection with the research report. Subject Company has been the client of NAYAN M VALA SECURITIES PVT. LTD. or its associates during twelve months preceding the date of distribution of the research report and NAYAN M VALA SECURITIES PVT. LTD. may has co-managed public offering of securities for the subject company in the past twelve months. - NO The Research Analyst has served as officer, director or employee of the subject company - NO Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that may be inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest including but not limited to those stated herein. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject NAYAN M VALA SECURITIES PVT. LTD. or its group companies to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to NAYAN M VALA SECURITIES PVT. LTD. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of NAYAN M VALA SECURITIES PVT. LTD. All trademarks, service marks and logos used in this report are trademarks or registered trademarks of NAYAN M VALA SECURITIES PVT. LTD. or its Group Companies. The information contained herein is not intended for publication or distribution or circulation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read Risk Disclosure Document for Capital Market and Derivatives Segments as prescribed by Securities and Exchange Board of India before investing in Indian Securities Market. In so far as this report includes current or historic information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. MEMBER: NATIONAL STOCK EXCHANGE OF INDIA LTD CODE NO MEMBER: BOMBAY STOCK EXCHANGE LTD CODE NO MEMBER: THE CALCUTTA STOCK EXCHANGE ASSOCIATION LTD CODE NO. 56 MEMBER: MCX-SX CIN NO. CODE NO. 821 U6712MH25PTC NAYAN M. VALA SECURITIES PVT.LTD. Tel: (+91-22) / , Cosmos Court, Fax Above Waman Hari Pethe Jewellers research@nayanmvala.com S. V. Road, Vile-Parle (West), Website: Mumbai 456. INDIA Pg. 11